financial results for q1 2011
DESCRIPTION
TVN Group Financial Results for Q1 2011TRANSCRIPT
1
TVN Group Financial Resultsfor the first quarter of 2011
Markus Tellenbach, CEO TVN Group, CEO ‘n’Piotr Walter, VP TelevisionŁukasz Wejchert, VP Online, CEO OnetJohn Driscoll, Board Member, CFO
Warsaw, May 12 th, 2011
2
Disclaimer
• This presentation (the “Presentation”) has been prepared by TVN S.A. (the “Company”) solely for use by its shareholders, clients or analysts and should not be treated as a part
of any invitation or offer to sell any securities, invest or deal in or a solicitation of an offer to purchase any securities or recommendation to conclude any transaction, in particular
with respect to securities of TVN S.A.
• The information contained in this Presentation is derived from publicly available sources which Company believes are reliable, but TVN S.A. does not make any representation as
to its accuracy or completeness. TVN S.A. shall not be liable for the consequences of any decision made based on information included in this Presentation.
• The information contained in this Presentation has not been independently verified and is, in any case, subject to changes and modifications. TVN S.A.’s disclosure of the data
included in this Presentation is not a breach of law for listed companies, in particular for companies listed on the Warsaw Stock Exchange. The information provided herein was
included in current or periodic reports published by TVN S.A. or is additional information that is not required to be reported by Company as a public company.
• In no event may the content of this Presentation be construed as any type of explicit or implicit representation or warranty made by TVN S.A. or, its representatives. Likewise,
neither TVN S.A. nor any of its representatives shall be liable in any respect whatsoever (whether in negligence or otherwise) for any loss or damage that may arise from the use
of this Presentation or of any information contained herein or otherwise arising in connection with this Presentation.
• TVN S.A. does not undertake to publish any updates, modifications or revisions of the information, data or statements contained herein should there be any change in the
strategy or intentions of TVN S.A., or should facts or events occur that affect TVN S.A.’s strategy or intentions, unless such reporting obligations arises under the applicable laws
and regulations.
• This Presentation contains certain market information relating to the television broadcasting sector in Poland, including information on the market share of TVN S.A. and certain
of its competitors. Unless attributed exclusively to another source, such market information has been calculated based on data provided by third party sources identified herein
and includes estimates, assessments, adjustments and judgments that are based on TVN S.A.’s experience and familiarity with the sector in which TVN S.A. operates. Because
such market information has been prepared in part based upon estimates, assessments, adjustments and judgments and not verified by an independent third party, such market
information is, unless otherwise attributed to a third party source, to a certain degree subjective. While it is believed that such estimates, assessments, adjustments and
judgments are reasonable and that the market information prepared is appropriately reflective of the sector and the markets in which TVN S.A. operates, there is no assurance
that such estimates, assessments and judgments are the most appropriate for making determinations relating to market information or that market information prepared by other
sources will not differ materially from the market information included herein.
• TVN S.A. hereby informs persons viewing this Presentation that the only source of reliable data describing TVN S.A.’s financial results, forecasts, events or indexes are current or
periodic reports issued by TVN S.A. in satisfaction of its disclosure obligations under Polish law.
3
1. Introduction
2. TV segment
3. ‘n’ platform
4. Online segment
Agenda
5. Financial review
6. Conclusions
7. Q&A session
4
• Strong first quarter driven by revenue diversification initiatives
– ‘n’ platform improves all financial metrics: increases customer base and ARPU with
continued cost management
– Onet maintains high pace: double-digit revenue growth and high operating leverage
– TV segment stable: non-advertising revenue growth offsets muted roll out of
advertising campaigns; profitability performance reflects investments in
programming schedules
• Key strategic initiatives yield expected results
– Non-advertising revenue sources reached 43% of total compared to 40% year ago
– Launch of first retail bundled offerings with TP Group in 2Q are well on track
– Strong balance sheet with high liquidity and a distant maturity of debt maintained
TVN Group Highlights
5
Revenue growth driven by Pay TV
� TV broadcasting top line stable with
growth in content sales, call TV, carriage
fees and other revenue offsetting shortfall
in advertising and sponsoring
� Pay TV revenue up 27% reflecting growth
in subscriber base and ARPU
� Online revenue growth of 12% driven by
continued migration of advertising budgets
from traditional to online media
in PLN million
582547
400,0
450,0
500,0
550,0
600,0
1Q 2010 1Q 2011
+ 7%
Revenue
6
98
117
0
50
100
150
200
1Q 2010 EBITDA 1Q 2011 EBITDA
EBITDA growth reflects operating leveragein Pay TV and online segments
� Strong operating leverage in Pay TV and
Online segments provided PLN 29 million
of EBITDA growth
� Making prudent investments to further
strengthening TV programming schedule
� Solid margins with the Group
transforming more than half of revenue
growth into profitability improvement
18%20%
EBITDA margin
in PLN million
+ 19%
EBITDA
7
TV segment
8
TV segment highlights: investing now, ROI will follow
• Revenue diversification results in stable year-on-year
performance– Advertising and sponsoring decrease by 3% vs. TV ad market growth of 2%
• Impacted by slow start of advertising market and increased distribution of main competitor
– Content sales, carriage fees, call TV and other revenue compensated for the shortfall
with 16% growth rate
• Profitability reflects programming investment and market
environment– TV segment EBITDA margin at 32%
• TVN again leads the market in the opening of spring season– TVN main channel outperformed key competitors by differences ranging
from 3 to 5 pp of peak-time audience share in the basic commercial target group
9
26,6%
30,2%
33,6%
9,7%
264 258
528 546
0
200
400
600
800
1 000
1Q 2010 1Q 2011
TVN TV advertising revenue Other TV advertising revenue
TVN spot sales reflect shift in audience shares
1 Source: Starlink for total market and TVN for own data, airtime only, in PLN million
2 Source: Starlink, airtime and sponsoring
TVN on TV advertising market 1 TV advertising market shares 2
+ 1.5% 804792
- 2.5%11,0%
32,4%
29,4%
27,2%
1Q 2010 1Q 2011
TVP
PolsatTVN
TVP
PolsatTVN
� TVN audience was impacted by distribution of the main competitor widened
at the end of last year, reflected in the relative shift of ad spend in a muted market
+ 3.3%
10
130
114
+ 1
- 17
75
100
125
150
175
1Q'10 Revenue impact Cost impact 1Q'11
Stable top line with profitability impacted by investments
358358 + 10
- 10
200
250
300
350
400
1Q'10 Advertising andSponsoring
Content sales,carriage fees, call
TV and other
1Q'11
Revenue EBITDA and margin
in PLN million
� Stable top line reflects growth of non-advertising revenue and slow start of
advertising market
� EBITDA and margin driven by early investments in programming
+ 0%
- 12%
36%32%
EBITDA marginX% change vs. 1Q 2010 Revenue / EBITDA
11
12%
14%
16%
18%
20%
22%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
TVP1 TVP2 Polsat TVN
23,1% 21,4%
37,2%
22,8% 22,6%
35,2%
0%
10%
20%
30%
40%
50%
TVN Group Polsat Group TVP Group
1Q 2010 1Q 2011
TVN entered spring season at #1 position
Low seasonSpring season
Source: Nielsen Audience Measurement Jan 2010 – Mar 2011, Peak time, 16-49
� Good audience share performance at the entry to spring season
� Year-on-year evolution impacted by improved distribution of main competitor
Low seasonAutumn season Low season
18,9% 16,6%
34,8%
18,4% 16,8%
32,3%
0%
10%
20%
30%
40%
50%
TVN Polsat TVP1 & TVP2
1Q 2010 1Q 2011
- 0.5pp + 0.2pp - 2.5pp
- 0.3pp + 1.2pp - 1.9pp
12
Healthy contribution of thematic channels
8,3
8,3
8,3
8,2
5,1
0 2 4 6 8 10
TVN 24
TVN Style
TVN Turbo
TVN Meteo
TVN CNBC
Average increase in subscriber base of 6%
� Advertising and sponsoring revenues
up 6% driven by continuous growth of
audience shares
� Carriage fees up 8% with subscriber
base increase and 2% year-on-year
depreciation of PLN vs. EUR
…
Percentage growth in number of CATV & DTH subscribe rs in March 2011 (yoy)
+ 6%
+ 5%
+ 6%
+ 6%
+ 7%
…%
Number of CATV & DTH subscribers in March 2011 in m illion
13
‘n’ platform
14
• Subscriber base growth of 15% coupled with 5% improvement in ARPU drove top line increase
– 25 thousand net post-paid additions in 1Q
• EBITDA nears breakeven owing to operating leverageand impact of cost restructuring
– 27% higher top line with only 7% increase in programming costs
• Both subscriber and profitability metrics are well on track to reach the full year guidance
‘n’ platform highlights: on track with guidance
15
Subscriber and ARPU growth drive financial performance
- 25
- 2
-30
-20
-10
0
1Q'10 1Q'11
176
138
50
100
150
200
1Q'10 1Q'11
in PLN million
� 27% revenue growth reflects increasing subscriber base and ARPU
� Strong operating leverage with almost two thirds of revenue growth to EBITDA
Revenue EBITDA
+ 27%
X% change vs. 1Q 2010 Revenue / EBITDA
+ 92%
16
724 830
0
500
1000
1Q'10 1Q'11
Post-paid
Subscriber base growth in line with expectations
Subscriber numbers in thousands
+ 15%
Quarter-end subscriber base
�81 thousand new post-paid
subscribers acquired in 1Q
� 25 thousand of net additions
�Active subscriber base up
by 106 thousand year-on-year
� Active post-paid subscriber base up 15%
with pace of growth well on track to reach full year target
17
Healthy ARPU maintained despite impact of 4Q promotions
�Quarterly ARPU at PLN 59.9
� ARPU growth at 5% year-on-year
� Quarter-on-quarter evolution reflects
temporary impact of Christmas sales
promotions on January figures
59,960,260,3
58,357,3
40
50
60
1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011
Quarterly post-paid ARPU evolution (in PLN)
60,360,159,2
40
50
60
Jan'11 Feb'11 Mar'11
18
38
40
10
20
30
40
50
2Q'10 1Q'11
Pre-paid HD recharged
256307
0
200
400
1Q'10 1Q'11
Pre-paid SD recharged
Strong shift in pre-paid towards HD offer
Customer numbers in thousands
- 17%
Quarter-end active customer bases
� Successful introduction and
roll-out of pre-paid HD offering
� 17 thousand new cards
activated in 1Q
� Pre-paid HD ARPU at PLN 16.6
� ARPU of pre-paid SD offer at
PLN 12.2
10x
19
Online segment
20
Online segment highlights: strong growth reflecting market leadership position
• Double-digit top line growth driven by continuous development of online advertising market
– Total revenue, both reported and cash, increased by 12%
– Display cash revenue up 22% year-on-year compared to displaymarket growth of 14%
• EBITDA up 42% to PLN 20 million, reaching 34% margin– Cash EBITDA margin improved to 33% from 32% year ago
– Onet portal standalone cash EBITDA margin stable at 41%
• Onet’s focus on premium inventory drives leadershipin online display
2121
18
16
- 2
2
0
10
20
30
1Q'10 1Q'11
Online advertising continues to post double digit growth
in PLN million
� Robust internet advertising market
� High operating leverage drove significant increase in EBITDA
Revenue EBITDA and margin
48
44
54
0
20
40
60
80
1Q'10 1Q'11
Cash revenue Barter revenue
52
58+ 12%
X% change vs. 1Q 2010 Revenue / EBITDA
27%
33%
Reported EBITDA margin
+ 12%
14
20
Cash EBITDA margin
32%
34%+ 15%
+ 42%
2222
Onet maintains leadership positionfocusing on premium online inventory
� Onet Group leads Polish online market in key commercial thematic services
� Total Real Users reached 13.5 million,
up by close to one million year-on-year
� Usage is driven mainly by key premium
thematic services such as News,
Entertainment, Business, Lifestyle
� Pricing for advertising in premium
inventory is 2-4 times higher than online
average price and more than 10 times
pricing for social media
Source: Megapanel PBI / Gemius for February 2011
Utilisation and inventory of main portals in Poland
Page views (in billions)
1,9
2,7
0,4 0,8
0,34
6
8
10
12
14
00:30 01:30 02:30 03:30 04:30 05:30 06:30 07:30
Time spent per user
Rea
l use
rs (
in m
illio
ns)
Onet
WP
InteriaGazeta
o2
23
Financial review 1Q 2011
24
• Top line growth of 7% reflects further solid uptake in Pay TV and Online
revenues, coupled with stable TV performance
• EBITDA improved by 19% owing to:
– significant operating leverage in Pay TV and Online
– lower profitability of TV business reflecting muted market uptake coupled with
increased programming investment aimed at further strengthening of our schedules
• Net finance result driven mainly by interest expense with impact of FX offset by
risk management activities
• Net loss attributable to the owners of TVN S.A. amounted to PLN -40 million
• Gross Debt consists primarily of Eurobonds while Net Debt to comparable
EBITDA ratio maintained at 3.9x
TVN Group financial highlights
25
547 582
+ 6
- 11+ 38+ 1
0
200
400
600
800
1Q'10 Revenue TV 'n' Online Other revenue andconso adjustments
1Q'11 Revenue
Revenue - Growth driven by Pay TV and Online
in PLN million
+ 7%+ 35 mn
26
98
117
+ 6+ 6
+ 23- 16
0
50
100
150
1Q'10 EBITDA TV 'n' Online Other EBITDA andconso adjustments
1Q'11 EBITDA
EBITDA - Growth reflects operating leverage in Pay TVand Online, coupled with increase in TV programming cost
in PLN million
18%20%
EBITDA margin
+ 19%+ 18 mn
27
Financing costs - Driven mainly by interest expense
PLN million 1Q 2011 1Q 2010
Interest income + 6 + 3
Interest expense - 92 - 68
- including interest on foreign exchange forward contracts - 10 -
Foreign exchange gains (losses) net, of which: + 12 + 120
- unrealized foreign exchange gains (losses) - 41 + 105
- fair value hedge impact + 47 -
Other finance expense, net - 5 - 9
Net finance result - 78 + 46
28
- 40
117
- 26- 5
- 85
+ 47- 35
- 64
- 15
-60
-40
-20
0
20
40
60
80
100
120
140
1Q'11 EBITDA Depreciation andamortisation
FX loss before fairvalue hedge
Fair value FX hedgeimpact
Interest income &expense, net
Other finance costs,net
Earnings beforeincome tax
Income tax Net result to ownersof TVN S.A.
EBITDA to Net Profit Bridge
in PLN million
29
in PLN million1 Cash, cash equivalents, liquid financial assets available for sale and bank deposits above 3 months.
Cash flow - Generation supported by gain on FX hedge
802 785688
+ 6- 139
+ 37+ 3
- 5
- 55+ 38
0
250
500
750
1 000
Cash EoY 2010
Operating CF CAPEX Tax paid Interest, net Cash afteroperations
Cash gain onFX hedges
Repurchaseof PLN bonds
Other Cash EoP 1Q'11 1 1
30
Stable leverage with Net Debt neutral repurchaseof PLN bonds
PLN million March 31, 2011 Maturity
10.75% Senior Notes 1 2 379 2017
7.875% Senior Notes 1 702 2018
PLN Bonds 1 6 2013
Accrued interest 2 116 -
Cash and liquid assets 3 - 688 -
Net Debt 2 515 -
Comparable EBITDA 4
(12-month rolling)647 -
Net Debt / EBITDA 3.9 -
� Distant maturity of gross debt
� 2017 and beyond
� High liquidity
� PLN 688 million in cashand bank deposits
� FX exposure successfully hedged in 1Q
� Redemption of remainingPLN bonds to be completedby mid 2011
1 Nominal value.2 Please note that according to our revised definition of Gross Debt bank guarantees are excluded from its calculation.3 Cash, its equivalents, liquid financial assets available for sale and bank deposits above 3 months, excluding restricted cash.4 Reported EBITDA excluding ‘n’ restructuring costs in 4Q 2010.
31
Conclusions
32
Positioned for growth: diversified revenue baseand revised positive market outlook
• Solid growth and contribution to profitability by Pay TV segment
reconfirming full year EBITDA positive guidance for ‘n’
• Online revenue performance in line with expectations while profitability
enhanced by high operating leverage
• Revision of 2011 guidance for expected TV advertisi ng market
growth rate: mid single-digit
• Muted TV advertising market evolution in the beginning of 2011
triggered implementation of all measures necessary to maintain TV
segment’s leadership position in audience whilst securing profitability
33
Additional financial slides
34
TV channels: 1Q revenue and EBITDA evolution
93
71
30%
37%
0
50
100
1Q'10 1Q'1120%
40%
60%
TVN channel EBITDA and margin
- 23%
252 238
0
100
200
300
1Q'10 1Q'11
TVN channel revenue
- 5%
4954
0
40
80
1Q'10 1Q'11
TVN24 channel revenue
+ 9%57
66
0
40
80
1Q'10 1Q'11
Other thematic channels revenue
+ 16%
2326
49%47%
0
20
40
1Q'10 1Q'1140%
60%
80%
TVN24 channel EBITDA and margin
+ 15%
1416
25% 24%
0
15
30
1Q'10 1Q'1110%
35%
60%
Other thematic channels EBITDA and margin
in PLN million
+ 15%
EBITDA margin
35
Revenue breakdown (by source)
PLN million 1Q 2011 1Q 2010 % change
Ad revenue (including online and ‘n’)
305 301 + 2%
TV ad revenue (incl. ‘n’) 258 259 0%
Online ad revenue 47 41 14%
Sponsoring 26 29 - 10%
Audiotele, Teleshoping 10 7 + 35%
Internet subscription fees 4 6 - 21%
Carriage fees (incl. ‘n’) 44 40 + 10%
‘n’ subscription revenue 164 133 + 23%
Other 29 31 - 5%
TOTAL REVENUE 582 547 + 7%
36
Revenue breakdown (by segments)
PLN million 1Q 2011 1Q 2010 % change
TV Broadcasting & Production 358 358 0%
TVN channel 238 252 - 5%
Ad revenue 209 219 5%
Sponsoring 20 24 - 14%
Others 9 9 - 4%
TVN 24 channel 54 49 9%
Subscription fees 31 29 7%
Ad revenue 20 18 16%
Sponsoring 3 2 2%
Others 0 0 - 56%
Thematic channels 66 57 16%
Subscription fees 17 15 10%
Ad revenue 28 28 0%
Sponsoring 3 3 10%
Others 18 11 67%
Online 58 52 12%
Onet 51 45 12%
Ad revenue 43 36 17%
User generated 6 7 - 21%
Others 3 2 24%
Other 8 7 12%
ZUMI 6 6 - 4%
Other 1 0 239%
‘n’ Platform 176 138 27%
Subscription fees 164 133 23%
Other 12 5 152%
Other revenue 12 22 - 45%
Other reconciling items -23 -24 - 5%
Total revenue 582 547 7%
37
Thank you